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Brendan McDermid | Reuters
In turbulent markets, investors can turn to dividend-paying stocks, which provide income and can help cushion a portfolio during difficult times.
Given the huge number of dividend-paying companies, choosing the right stocks can be a difficult task. To this end, investors can follow the recommendations of Wall Street experts who thoroughly analyze a company's earnings growth potential and dividend history.
Here are three attractive dividend stocks according to Wall Street's top pros on TipRanks, a platform that ranks analysts based on their past performance.
IBM
The first dividend favorite this week is the tech giant IBM (IBM), which reported mixed results for the first quarter. The company's earnings beat expectations, while revenue fell short of estimates amid an uncertain macroeconomic backdrop. Additionally, IBM announced the acquisition of cloud software maker HashiCorp for $6.4 billion.
IBM paid $1.5 billion in dividends in the first quarter. The company generated free cash flow of $1.9 billion in the first quarter of 2024 and expects free cash flow of about $12 billion for the full year. IBM's yield is about 4%.
Recently, Evercore analyst Amit Daryanani reiterated his buy rating on IBM shares with a price target of $215. The analyst is confident in the company's growth levers and expects it to benefit from several tailwinds, including generative artificial intelligence and accelerating consulting revenue.
“IBM expressed confidence that consulting revenue will increase in the second half of the year following two percent growth in the first quarter,” Daryanani said.
While the consulting business was impacted in the first quarter of 2024 by the impact of macroeconomic challenges on discretionary spending, the analyst noted that there are many catalysts pointing to increased growth going forward. These catalysts include generative AI ramps, order conversion, and M&A contributions in the second half of 2024 from previously announced deals. Daryanani is also optimistic about sustained growth in the mainframe business.
Daryanani ranks 243rd among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 59% of the time, generating an average return of 13.2%. (See IBM share buybacks on TipRanks)
Hasbro
We switch to the toy manufacturer Hasbro (HAS). In April, the company reported better-than-expected first-quarter earnings thanks to its turnaround efforts. Hasbro paid $97.2 million in dividends in the first quarter of 2024. HAS offers a dividend yield of 4.7%.
After meeting with Hasbro management at JPMorgan's 52nd annual TMC conference, JPM analyst Christopher Horvers upgraded HAS stock from “Hold” to “Buy” and raised the price target from $61 to $74.
The analyst explained that his estimates for Hasbro are higher than consensus forecasts because Wall Street underestimates the company's cost efficiency efforts and digital gaming prospects, both of which are expected to play out in the second half of 2024 and the first half of 2025.
Despite a shortened holiday season, Horvers is optimistic that the industry will see improved growth in 2024 due to the recovery in low-price, short-replacement-cycle product categories.
“HAS is better positioned in H2 2024 particularly due to the shift of Transformers from Q2 to Q3 and the early benefits of improved merchandising (novelty and process improvements under new management),” the analyst said.
Horvers is ranked 769th among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 60% of the time, generating an average return of 7.2%. (See Hasbro Technical Analysis on TipRanks)
Goal
Finally, let’s look at the major retailers Goal (TGT). In the first quarter of 2024, Target paid $508 million in dividends to shareholders. TGT offers a dividend yield of 2.8%.
Baird analyst Peter Benedict commented on Target's first-quarter results, noting that the company slightly missed analysts' earnings per share expectations as higher operating expenses offset gross margin increases.
Benedict believes that the sell-off in TGT stock following the earnings release appears overdone due to lower-than-expected earnings and the price cuts announced by the company. He claims that incremental investment in value and affordability through low prices has always been part of Target's strategy for fiscal 2024. The analyst added that the company's inventory remains in good shape.
In particular, Benedict believes that management's goal of returning to positive comparable sales growth appears achievable in the second fiscal quarter, as comparability with the same period last year is easier.
The analyst also believes that the company “continues to plan prudently given the price-conscious spending environment.”
Overall, Benedict believes the risk-reward profile of TGT stock is compelling. The analyst reiterated his buy rating on Target with a price target of $190.
Benedict ranks 77th among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, generating an average return of 15.1%. (See Target insider trading activity on TipRanks)